DEPARTMENT OF TRANSPORTATION. AGENCY: Federal Highway Administration (FHWA), Department of Transportation

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1 This document is scheduled to be published in the Federal Register on 02/20/2015 and available online at and on FDsys.gov DEPARTMENT OF TRANSPORTATION [ P] Federal Highway Administration 23 CFR Part 515 [Docket No. FHWA ] RIN 2125-AF57 Asset Management Plan AGENCY: Federal Highway Administration (FHWA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: The FHWA proposes to establish a process for the development of a State asset management plan in accordance with section 1106 of the Moving Ahead for Progress in the 21st Century Act (MAP-21), to improve or preserve the condition of the assets and the performance of the National Highway System (NHS) as they relate to physical assets. In this document asset management plan and risk-based asset management plan are used interchangeably. An asset management plan is a key management tool for highway infrastructure owners. State departments of transportation (State DOT) increasingly use asset management plans to make decisions about where and when to invest State and Federal funds in highway infrastructure improvements to achieve and sustain a desired state of good repair over the life cycle of the assets at minimumpracticable cost. The development and implementation of an asset management plan also is an important part of the overall MAP-21 framework for enhancing the management and performance of transportation highway infrastructure funded through the Federal-aid highway program (FAHP). The asset management plan required by

2 section 1106 of MAP-21 will provide States with critical data and identify investment and management strategies to improve or preserve the condition of the assets and the performance of the NHS. Under section 1106, the plan must include strategies leading to a program of projects that would make progress toward achievement of the State targets for asset condition and performance of the NHS in accordance with section 1203(a) of MAP-21, and supporting progress toward the achievement of the national goals identified in section 1203(a). While the primary purpose of this proposed rule is to address asset management plan requirements in section 1106, this proposed rule also would address other MAP-21 requirements that relate to asset management. The proposed rule defines the minimum standards that States would use in developing and operating highway bridge and pavement management systems as required by section 1203(a) of MAP-21. Also, this proposed rule would address the requirements in section 1315(b) of MAP-21 by requiring States to conduct statewide evaluations to determine if reasonable alternatives exist to roads, highways, or bridges that repeatedly require repair and reconstruction activities from emergency events. The proposed rule would require State DOTs to take these evaluations into account in their asset management plans for facilities that are included in the plans. DATES: Comments must be received on or before [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. Late-filed comments will be considered to the extent practicable. ADDRESSES: To ensure that you do not duplicate your docket submissions, please submit them by only one of the following means: 2

3 Federal erulemaking Portal: Go to and follow the online instructions for submitting comments. Mail: Docket Management Facility, U.S. Department of Transportation, 1200 New Jersey Avenue, SE., W12-140, Washington, DC Hand Delivery: West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., between 8:30 a.m. and 4:00 p.m., e.t., Monday through Friday, except Federal holidays. The telephone number is Instructions: You must include the agency name and docket number or the Regulatory Identification Number (RIN) for the rulemaking at the beginning of your comments. All comments received will be posted without change to including any personal information provided. FOR FURTHER INFORMATION CONTACT: Ms. Nastaran Saadatmand, Office of Asset Management, , or Ms. Janet Myers, Office of the Chief Counsel, , Federal Highway Administration, 1200 New Jersey Avenue, SE., Washington, DC Office hours are from 8:00 a.m. to 4:30 p.m., e.t., Monday through Friday, except Federal holidays. SUPPLEMENTARY INFORMATION: Electronic Access and Filing This document and all comments received may be viewed online through the Federal erulemaking portal at Electronic submission and retrieval help and guidelines are available on the Web site. It is available 24 hours each day, 365 days this year. Please follow the instructions. An electronic copy of this document may 3

4 also be downloaded from the Office of the Federal Register s home page at EXECUTIVE SUMMARY I. Purpose of the Regulatory Action This regulatory action would establish a process that States DOTs would use to develop a State asset management plan, in accordance with section 1106(a) of MAP-21, codified as 23 U.S.C Asset management, as defined in 23 U.S.C. 101(a)(2), is a strategic and systematic process of operating, maintaining, and improving physical assets, with a focus on both engineering and economic analysis based on quality information, to identify a structured sequence of maintenance, preservation, repair, rehabilitation, and replacement actions that will achieve and sustain a desired state of good repair over the life cycle of the assets at minimum practicable cost. Asset management plans are an important highway infrastructure management tool to improve and preserve the condition of assets and system performance. Asset management plans help agencies answer five core questions: (1) What is the current status of our assets? (2) What is the required condition and performance of those assets? (3) Are there critical risks that must be managed? (4) What are the best investment options available for managing the assets? (5) What is the best long-term funding strategy? The need for effective asset management practices nationwide stems from a combination of challenges facing the State DOTs and FHWA. First, the nature of the FAHP has changed over the last several decades. Whereas the FAHP once primarily 4

5 funded major new-location infrastructure projects, today the FAHP primarily focuses on preserving existing infrastructure through preventative maintenance and reconstruction. This work is complicated by the variable effects of increased usage, infrastructure age, and deterioration and damage from environmental conditions, including extreme weather. Second, funding needs for the FAHP far exceed available Federal funding. Making sound investment decisions is more important in an environment of financial scarcity. Third, the expectations of Congress and the general public have changed since the early days of the FAHP. Today, both expect highly transparent, accountable, data-driven decisionmaking about the investment of FAHP funds. The asset management requirements of 23 U.S.C. 119, together with the performance measures and targets established under 23 U.S.C. 150(c) and (d), will create national minimum requirements for practices that will help State DOTs and FHWA address these challenges. State DOTs are required to develop and implement asset management plans for the NHS to improve or preserve the condition of the assets and the performance of the NHS relating to physical assets. 23 U.S.C. 119(e)(1). State asset management plans must include strategies leading to a program of projects that would: (1) make progress toward achievement of the State targets for asset condition and performance of the NHS in accordance with 23 U.S.C. 150(d), and (2) support progress toward the achievement of the national goals identified in 23 U.S.C. 150(b). 23 U.S.C. 119(e)(2). State DOTs asset management plans must include a minimum scope (i.e., the NHS) and certain minimum contents (e.g., a financial plan) (see 23 U.S.C. 119(e)(4)). However, FHWA encourages State DOTs to exceed the minimum plan scope and contents because asset management plans can help State DOTs make better data-driven 5

6 investment decisions on a statewide basis. For example, all State DOTs, at a minimum, would develop an asset management plan for the NHS regardless of ownership; but, State DOTs may choose to go beyond that minimum and include other public roads within their asset management plans at their option. Also, State DOTs must include, at a minimum, a summary listing of the pavement and bridge assets on the NHS; however, State DOTs would be encouraged, but not required, to include all highway infrastructure assets within the right-of-way (ROW). Under the proposed rule, the State DOT would be required to include measures and targets for all assets included in the asset management plan. Performance measures can be used for a number of purposes in asset management. For example, an agency may use performance measures to evaluate a range of potential solutions to a transportation need, to track the impacts of investments, and to provide accountability to the public. Performance measures are an integral part of a data-driven, performance-based approach to asset management. Agencies develop targets related to their performance measures to guide their resource allocation and program delivery. Targets may represent the desired future in a relatively long-term context, taking into account existing baseline conditions, budget constraints, and longer-term goals. Alternatively, agencies may use targets to measure the interim progress on a measure, in a relatively short-term context, as agencies implement their transportation program. For NHS pavement and bridge assets, which the State is required to include in its asset management plan, the State DOT s plan would include the national measures for bridge and pavement condition established by FHWA (see FHWA s related NPRM on Performance Management Measures for Bridges and Pavement, RIN 2125-AF53), and the targets the State DOT develops for those measures. 6

7 Those measures and targets will be established pursuant to requirements under 23 U.S.C. 150(c) and (d). If a State DOT has pre-existing measures and targets for pavements and bridges on the NHS and wishes to continue to include those in its plan as part of its asset management effort, it may do so. However, those pre-existing measures and targets cannot and will not substitute for the national measures under 23 U.S.C. 150(c) or the required section 150(d) State targets for those national measures either in the required asset management plan or other provisions under title 23. For any additional assets the State DOT decides to include in its asset management plan, the State DOT would develop its own measures and targets. These proposed regulations would ensure that State DOTs establish and follow a set of processes to identify the investment strategies included in the asset management plans. These processes relate to performing analyses at the program level, including performance gap analysis, life-cycle cost analysis, and risk analysis. The intention is all State DOTs will use asset management to undertake a strategic and systematic process of effectively operating, maintaining, upgrading, and expanding physical assets throughout their life cycles in order to achieve and sustain a desired state of good repair. The goal is better decisionmaking that is based upon quality information and well-defined objectives, and considers risks to the assets and system performance as part of the decisionmaking process. In addition to the asset management plan process required under 23 U.S.C. 119(e)(8), this proposed rule addresses other requirements established in 23 U.S.C. 150 and in section 1315(b) of MAP-21. This proposed rule would define the minimum standards that States would use in developing and operating highway bridge and 7

8 pavement management systems required under 23 U.S.C. 150(c)(3)(A)(i). This proposed rule would require States to address the requirements in MAP-21 section 1315(b) by conducting evaluations to determine if reasonable alternatives exist to roads, highways, or bridges that repeatedly require repair and reconstruction activities from emergency events. The proposed rule would require States to take these evaluations into account in their asset management plans to the extent those assets are included in the asset management plan. II. Summary of the Major Provisions of the Regulatory Action in Question Section would clarify that the purposes of the proposed rule are to: (1) establish the processes that a State DOT would be required to use to develop its asset management plan, as required under 23 U.S.C. 119(e); (2) establish the minimum content requirements that apply to the development of an asset management plan; (3) set forth the minimum standards for a State DOT to use in developing and operating bridge and pavement management systems as required under 23 U.S.C. 150(c)(3)(A)(i); (4) describe the statutory penalties for a State DOT s failure to develop and implement an asset management plan in accordance with 23 U.S.C. 119 and the requirements established through this rulemaking; and (5) establish the requirements for State DOTs to conduct periodic evaluations to determine if reasonable alternatives exist to roads, highways, or bridges that repeatedly require repair and reconstruction activities due to emergency events. Section specifies that the proposed rule would be applicable to all State DOTs. Section includes definitions for certain terms that would be applicable to 8

9 the proposed regulations. With respect to the definition of asset management, the proposed rule uses the definition of this term found at 23 U.S.C. 101(a)(2). Section proposes the processes that State DOTs would be required to use in developing their asset management plans. These processes align with the minimum content elements that the statute (23 U.S.C. 119) requires to be included in the asset management plan, and also align with the contents the proposed rule would require in asset management plans under section These processes take a broad look at the NHS as a network. Under the proposed section , State DOTs would use the following processes to develop their asset management plans: First, each State DOT would be required to establish a process for conducting a performance gap analysis and to identify strategies to close gaps. A performance gap analysis identifies deficiencies that may be hindering achievement of the State DOT s targets for asset condition and the State s desired system performance as it relates to physical assets on the NHS. As previously indicated, if the State DOT chooses to include other public roads or assets in the asset management plan, then the State DOT would be required to conduct a performance gap analysis for those other roads and assets as well. Second, each State DOT would be required to establish a process for conducting life-cycle cost analysis for an asset class or asset sub-groups at the network level. Life cycle cost analysis is used to develop a strategic treatment plan for the whole life of assets. The strategic treatment plan considers application of all possible treatments during the asset s life (i.e. preservation, rehabilitation, and reconstruction along with routine and corrective maintenance). This strategic treatment plan is used not only to 9

10 make the assets serviceable, but to extend the service life of assets beyond their design life. This approach produces cost savings, a benefit of asset management. For purposes of this rule, life-cycle cost analysis would be defined as the cost of managing an asset class or asset sub-group for its whole life, from initial construction to the end of its service life. 1 A life-cycle cost analysis would mean a process to estimate the cost of managing an asset class, or asset sub-group over its whole life with consideration for minimizing cost while preserving or improving the condition. Third, to ensure the asset management plan is risk-based, as required by 23 U.S.C. 119(e)(1), each State DOT would be required to establish a process for undertaking a risk management analysis for assets in the plan. As part of this process, State DOTs would identify and assess risks (e.g., extreme weather) that can affect asset condition or the effectiveness of the NHS as it relates to physical assets. The process for risk management analysis would have to include addressing the risks to assets and to the highway system associated with current and future environmental conditions, including extreme weather events, climate change, and seismic activity, in order to provide information for decisions about how to minimize their impacts and increase asset and system resiliency. The process for risk management analysis also would be required to take into account, for assets in the plan, the results of the State DOT s evaluation of roads, highways, and bridges that have repeatedly required repair or reconstruction due to emergency events, as proposed in section of this rule. For assets in the asset 1 The FHWA interprets life-cycle cost analysis, as used in 23 U.S.C. 119(e)(4)(D), as intended to be consistent with life-cycle planning and life-cycle cost analysis as used in asset management. The definition proposed in this rulemaking is not intended to be the same as the definition in 23 U.S.C. 106(f), which focuses on life-cycle cost analysis in design. 10

11 management plan, State DOTs would be required to develop an approach to address and monitor high-priority risks to assets and the performance of the system. Fourth, each State DOT would be required to establish a process for developing a financial plan covering a 10-year period. The process would include a method to determine estimated costs of expected future work and estimated available funding. Fifth, each State DOT would be required to establish a process for developing investment strategies to improve or preserve the condition of the assets and the performance of the NHS, and leading to a program of projects that would make progress toward achievement of the State targets for asset condition and performance of the NHS established pursuant to 23 U.S.C. 150(d) and supporting the progress toward achievement of the national goals identified in 23 U.S.C. 150(b). 23 U.S.C. 119(e)(1)-(2). Finally, each State DOT would be required to use pavement and bridge management systems to analyze the condition of Interstate highway pavements, non- Interstate NHS pavements and NHS bridges, and to determine optimal management and investment strategies. Pavement and bridge management systems can support an agency s asset management practices by supporting the development of strategic performance objectives for the pavement and bridge assets and related highway systems. There are three major components to pavement and bridge management systems. Those are a system to regularly collect condition data; a computer database to sort and store the data; and an analysis program to evaluate repair, preservation, maintenance, and other management strategies and identify cost effective project options. State DOTs typically use commercially available software for the database and analysis components. State DOTs will be required to operate these systems under 23 U.S.C. 150(c)(3)(A)(i). The 11

12 FHWA also proposes the minimum standards each State DOT would need to meet in developing these management systems. These minimum standards would govern collecting, processing, storing, and updating data; forecasting deterioration; comparing cost benefit for alternative work types; identifying short and long range budget needs; determining optimal strategies on identified potential projects to manage pavements and bridges; and recommending programs and schedules for implementation. Section proposes the minimum content requirements that would be applicable to State DOT asset management plans. The proposed content of the plans, described below, would be derived largely from the application of the processes FHWA proposes under section First, this section of the proposed rule would describe the requirement for the State DOT to develop and implement an asset management plan to achieve and sustain a state of good repair over the life cycle of the assets, and to improve or preserve the condition of the NHS in accordance with 23 U.S.C. 119(e)(1)-(2). Pursuant to 23 U.S.C. 119(e)(4)(A), the State DOT would be required to include NHS highway pavements and bridges regardless of the ownership of the relevant NHS facility. The State DOT would be encouraged, but not required, to include in its asset management plan all other highway infrastructure assets within the NHS ROW, as well as highway infrastructure assets from other public roads. Second, each State DOT would be required, at a minimum, to include the following information in its asset management plan: Asset management objectives, which should align with the agency s 12

13 mission. The objectives must be consistent with the purpose of asset management, which is to achieve and sustain a desired state of good repair over the life cycle of the assets at a minimum practicable cost. Measures and targets designed to achieve and sustain a desired state of good repair over the life cycle of the assets at minimum practicable cost. This would include, at a minimum, the national measures that address the condition of pavements on the Interstate System, the condition of pavements on the NHS (excluding the Interstate), and the condition of bridges on the NHS. The FHWA will establish the national measures, pursuant to 23 U.S.C. 150(c)(3)(A)(ii)(I)-(III), in new regulations at 23 CFR part The State DOT also must include the targets the State DOT establishes pursuant to 23 U.S.C. 150(d) for the required national measures (State DOTs would report on the required targets as provided in 23 CFR part 490, once promulgated). Under the proposed rule, the State DOT would have the option of including other NHS assets and non-nhs assets in its plan. If the State does so, it would have to establish measures and targets for those assets. In addition, the State DOT may use other measures and targets for NHS pavements and bridges that the State DOT has established through pre-existing or new asset management efforts. However, such other measures and targets for pavements and bridges on 2 The proposed rule, National Performance Management Measures; Assessing Pavement Condition for the National Highway Performance Program and Bridge Condition for the National Highway Performance Program (RIN 2125-AF53), is available on the docket for review. 13

14 the NHS cannot and will not substitute for the required national measures and related State targets either in the required asset management plan or under other provisions of title 23. All requirements of this part would apply to all assets, measures, and targets in a State DOT s asset management plan. A summary listing of the pavement and bridge assets on the NHS, including at a minimum a description of the condition of those assets for: Interstate pavement, non-interstate NHS pavement, and NHS bridge assets. The FHWA proposes that each State DOT use these three categories in order to be consistent with the categories of performance measures that would be established under 23 U.S.C. 150(c)(3)(A)(ii). These requirements would apply regardless of what entity owns the NHS asset. Performance gap identification developed using the process the State DOT adopts pursuant to section Life-cycle cost analysis developed using the process the State DOT adopts pursuant to section Risk management analysis for assets and the highway network included in the plan, and including for those assets a summary of the results of the MAP-21 section 1315(b) statewide periodic evaluations; financial plan; and investment strategies. This analysis is developed using the process the State DOT adopts pursuant to section

15 Third, asset management plans would be required to cover a minimum 10-year period. The FHWA proposes this time period because MAP-21 calls for asset management plans to evaluate investment options on a life-cycle basis. If the time period covered by the plan is too short, it likely will result in the adoption of short-term solutions that may not be truly cost-effective. If the time period is too long, the State DOT may have little certainty about financial resources available in the later years of the plan. This would hinder the usefulness of the plan as a realistic guide for investment decisions. The proposed 10-year period is consistent with feedback received during the outreach activities carried out in anticipation of this rulemaking. Fourth, each State DOT would be required to discuss in its asset management plan a set of investment strategies leading to an immediate program of projects, as described in 23 U.S.C. 119(e)(2). The State DOT should include projects consistent with its investment strategies in its Statewide Transportation Improvement Program (STIP), and select projects from the STIP to support its efforts to achieve the State s targets for asset condition and performance of the NHS. Finally, FHWA proposes to require each State DOT to make its asset management plan available to the public, and encourages the State DOTs to do so in a format that is easily accessible. Section proposes a process that would enable a State DOT to phase in the development of its asset management plan. The FHWA recognizes that a phase-in approach would help give State DOTs adequate time to develop and apply the analytical processes required under proposed section The phase-in approach also takes into consideration the likely timing of the performance management rulemaking 15

16 proceedings for pavement and bridge conditions under 23 U.S.C. 150 (RIN 2125-AF53). The proposed phase-in would permit a State DOT to submit its initial asset management plan using best available information in each required analysis area, omit certain analyses, and exclude the 23 U.S.C. 150(c) measures and the related State DOT section 150(d) targets. However, the State DOT would be required to include in its initial plan a description of the asset management plan development processes the State DOT proposes to use pursuant to section Inclusion of the proposed processes in the initial plan will permit FHWA to use the initial plan to review and certify the State DOT s processes as required by 23 U.S.C. 119(e)(6). The proposed rule also would require the State DOT to include in its initial plan its own measures and targets for assets covered by the plan. Under the proposed rule, not later than 18 months after the effective date of the final rulemaking for pavement and bridge condition measures pursuant to 23 U.S.C. 150, State DOTs would have to amend their asset management plans to incorporate complete analyses carried out using certified processes and the section 150 measures and targets. Under the proposed rule, FHWA could extend the 18-month deadline for submitting an amended plan as needed to provide 12 months between the time FHWA certifies the State DOT s processes under 23 U.S.C. 119(e)(6)(A) and the date the amended plan is due. The FHWA could grant the extension only if it determines the State DOT s initial plan meets the requirements of proposed section Section proposes the process by which a State DOT would submit its asset management plan development processes to FHWA for certification pursuant to 23 U.S.C. 119(e)(6), and its asset management plan for an FHWA consistency determination under section 119(e)(5). 16

17 Section discusses the penalties for a State DOT that does not develop and implement an asset management plan consistent with 23 U.S.C. 119 and the requirements of this proposed rule. Section describes how a State DOT may integrate asset management into its organizational mission, culture, and capabilities at all levels. Section proposes that the State DOT conduct a periodic statewide evaluation not less than every 4 years of the State s existing roads, highways, and bridges that required repair and reconstruction activities due to emergency events. The purpose is to determine if there are reasonable alternatives to any of these roads, highways, and bridges as required under section 1315(b) of MAP-21. The proposed rule would require State DOTs to complete the evaluation for assets included in the asset management plan not later than 2 years after the issuance of a final rule. The State DOT would be required to complete the evaluation of the rest of the affected roads, highways, and bridges in the State within 4 years of the final rule. For facilities that are included in the asset management plan, State DOTs would need to include a summary of the results and consider the results of these evaluations in their risk management analyses included in the plan. III. Costs and Benefits The costs and benefits were estimated for implementing the requirement for States to develop a risk-based asset management plan and to use pavement and bridge management systems that comply with the minimum standards proposed by this NPRM. Based on information obtained from nine State DOTs, the total nationwide costs 17

18 for all States to develop their asset management plans and for four States 3 to acquire and install pavement and bridge management systems would be $43.2 million discounted at 3 percent and $36.7 million discounted at 7 percent. The FHWA lacks data on the economic benefits of the practice of asset management as a whole. The field of asset management has only become common in the past decade and case studies of economic benefits from overall asset management have not been published. We specifically request that commenters submit data on the quantitative benefits of asset management and reference any studies focusing on the economic benefits of overall asset management. While FHWA lacks data on the overall benefits of asset management, there are examples of the economic savings that result from the most typical component sub-sets of asset management, pavement and bridge management systems. Using an Iowa DOT study 4 as an example of the potential benefits of applying a long-term asset management approach using a pavement management system, the costs of developing the asset management plans and acquiring pavement management systems were compared to determine if the benefits of the proposed rule would exceed the costs. The FHWA estimates the total benefits for the 50 States, the District of Columbia, and Puerto Rico of utilizing pavement management systems and developing asset management plans to be $453.5 million discounted at 3 percent and $340.6 million discounted at 7 percent. Based on the benefits derived from the Iowa DOT study and the estimated costs 3 There are currently four States that don't currently have pavement and bridge management systems that meet the standards of the proposed rule. 4 Smadi, Omar, Quantifying the Benefits of Pavement Management, a paper from the 6 th International Conference on Managing Pavements,

19 of asset management plans and acquiring pavement management systems, the ratio of benefits to costs would be 10.5 at a 3 percent discount rate and 9.3 at a 7 percent discount rate. The estimated benefits do not include the potential benefits resulting from savings in bridge programs. The benefits for States already practicing good asset management decisionmaking using their pavement management systems will be lower, as will the costs. If the requirement to develop asset management plans only marginally influences decisions on how to manage the assets, benefits are expected to exceed costs. The FHWA requests comments on these estimates. Discounted at 3 percent Discounted at 7 percent Total Benefits for 52 States $453,517,289 $340,580,916 Total Cost for 52 States $43,159,635 $36,701,377 Benefit Cost Ratio BACKGROUND: Asset Management in General Historically, construction and expansion of roads, bridges, and other transportation infrastructure in the United States have been a central focus of transportation agencies. Highway infrastructure development peaked with the construction of the Interstate Highway System. Today, significant portions of our highway assets are deteriorating because of increased usage, environmental impacts, and aging. As a result, it is becoming increasingly necessary to focus on meeting the 19

20 demands of maintenance, preservation, and reconstruction of existing infrastructure. As State DOTs and other public sector owners of highway infrastructure are faced with increased system and budgetary needs at a time when resources are limited, asset management is critical now more than ever. In recent years, most transportation agencies have experienced reduced funding coupled with a loss of purchasing power. In addition, the fact that the transportation system is aging and becoming more costly to maintain has become a great concern. Federal, State, and local governments are under increasing pressure to balance their budgets and, at the same time, respond to public demands for quality services. Along with the need to invest in America s future, this leaves transportation agencies with the task of managing the current transportation systems as cost-effectively as possible, while managing potential risks to system performance. The Asset Management Plan requirement included in MAP-21 is in line with international best practices that were initiated abroad as the public sector in many countries experienced a reduction in resources available to maintain their assets in a stateof-good-repair. States in the U.S. have incorporated some elements of the asset management framework. However, despite the obvious benefits stemming from the use of an asset management framework, it has not yet been adopted by all States. The FHWA believes the disconnect results from States current practices. As an example, in many State DOTs the pavement management analysis is done at the State DOT s central office. The output is then forwarded to the district/regional offices that make the final decisions and have a lot of flexibility in what projects to take on. As a result, the projects are selected by field personnel whose expertise is in addressing immediate needs. The 20

21 concept of project selection based on an asset life cycle is unknown to many of them. Another major factor that results in some district/regional offices deviating from the recommendations made by the pavement management system is the lack of confidence in the quality of pavement data used in the analysis. An additional issue is the general resistance to changing from a worst-first approach to a life-cycle cost approach. Asset management is a business process and a decisionmaking framework for achieving and sustaining a desired state of good repair over the life cycle of the assets at minimum practicable cost. Asset management uses an extended time horizon, draws from economics, as well as engineering analyses, and considers a broad range of assets. An asset management approach also incorporates the economic assessment of trade-offs between alternative investment options, both at the project level and at the network or system level, and helps transportation agencies make cost-effective investment decisions. In addition, asset management helps ensure that the transportation system is financially sustainable. Asset management increases infrastructure resiliency against natural hazards (such as extreme weather events or seismic activities) and reduces or eliminates the impacts of potential threats to asset and system performance. A key feature of asset management is that it requires a statement of explicit, clearly defined goals that reflect customer expectations and considerations unique to each State DOT. These goals often address system performance and condition targets designed to achieve a state of good repair. All State DOTs currently manage their transportation network along with its assets; however, few apply risk-based asset management principles in their investment decisionmaking processes. For example, although most States conduct risk analyses at 21

22 the project level, risk assessment and management at the program level is often a missing component of current management practices. Congress has recognized the importance of risk analysis in asset management by expressly requiring the State asset management plan to be risk-based. 23 U.S.C. 119(e)(1). State DOTs must carefully analyze the impact on the long-term performance of the highway network when making decisions regarding funding distribution, especially when funding is reduced for one program and diverted to meet the pressing needs of another program. The impact of these tradeoffs could become very costly if appropriate analyses are not conducted prior to decisionmaking. Although risk-based asset management is a relatively new concept to transportation agencies, most State DOTs have many of the elements necessary to initiate asset management, including pavement and bridge management systems that monitor conditions, measure performance, predict trends, and recommend candidate projects and preservation treatments. Asset management brings a particular perspective to how an agency conducts its existing planning and programming procedures and reaches decisions. It suggests principles and techniques to apply in policymaking, planning, project selection, program tradeoffs, program delivery, data gathering, and management system application. Most importantly, it uses an effective communication tool the asset management plan to document how decisions regarding investment strategies are made, what actions are taken to improve or preserve the condition of the assets and system performance, how risks to system performance are managed, and how the costs of maintaining assets throughout their lives are considered. For State DOTs, development of a risk-based asset management plan will facilitate the communication between decisionmakers and stakeholders and assure the public that appropriate steps are taken 22

23 when making transportation investment decisions. DOT Outreach Efforts In developing these proposed regulations, FHWA conducted Web conferences, face-to-face meetings, made presentations at national conferences, and held teleconferences with stakeholders, including State DOTs. These sessions were intended to provide opportunities for stakeholders to discuss experiences, potential strategies for developing and implementing risk-based asset management within the context of MAP- 21, and concerns with the MAP-21 asset management requirements. In general, these consultations included: - Web conference on September 28, 2012, with the American Association of State Highway and Transportation Officials (AASHTO) Subcommittee on Asset Management; - Web conference on October 17, 2012, with representatives from the AASHTO Standing Committee on Planning and representatives from the Standing Committee on Highways; - Face-to-face meeting in Pittsburgh, PA on November 17, 2012, with the AASHTO Subcommittee on Asset Management; - Web conference on October 25, 2012, with the Asset Management Expert Task Group; and - Presentations that included information on the MAP-21 Asset Management requirements were held at the following events: o National Pavement Preservation Conference, Nashville, TN, August 2012; 23

24 o International Forum on Traffic Records, Biloxi, MS, October 2012; and o Transportation Research Board Meeting, Bridge Management Committee, January At each of these outreach sessions, some participants expressed that States be provided with flexibility in the development of their asset management plans so that they can properly address any issues that are unique to their State. The burden associated with developing a risk-based asset management plan (e.g., potential organizational restructuring, modification of decisionmaking processes, documentation of processes, and increases in staffing) was another concern. In addition, there were questions about the inclusion or exclusion of highways that are on the NHS, but maintained by municipalities or turnpike authorities. General Discussion of the Proposal This proposal is intended to implement 23 U.S.C. 119(e)(8), which requires the Secretary to establish, by regulation, the process States must use to develop their asset management plans. The proposed regulations would ensure that State DOTs follow a set of processes to identify the investment strategies included in the asset management plan. These processes relate to performing analyses at the program level including performance gap analysis, life-cycle cost analysis, and risk analysis. The intention is that investment strategies included in the asset management plans are developed based on a thorough assessment of the NHS infrastructure operation, preservation, and improvement needs, while minimizing the whole life costs of assets and understanding the potential risks to system performance. While the best practice is to perform inclusive gap and risk analyses encompassing all the national performance goal areas for the NHS (see 23 24

25 U.S.C. 150(b)), for the purpose of asset management plan development pursuant to 23 U.S.C. 119, the focus of these analyses should be on determining deficiencies and risks to physical asset conditions and system performance as it relates to physical assets. Link to Performance Management The overarching purpose of asset management is to achieve a desired state of good repair over the life cycle of assets at a minimum practicable cost. Development and implementation of a State asset management plan for NHS pavements and bridges is an important part of NHS performance management as envisioned in MAP-21. In 23 U.S.C. 119(e)(2), Congress provides that a State asset management plan shall include strategies leading to a program of projects that would make progress toward achievement of the State targets for asset condition and performance of the NHS in accordance with 23 U.S.C. 150(d), and supporting the progress toward the achievement of the national goals identified in 23 U.S.C. 150(b). Section 119(b)(3) specifies that the purpose of the National Highway Performance Program (NHPP) shall be to ensure that investments of Federal-aid funds in highway construction are directed to support progress toward the achievement of performance targets established in an asset management plan of a State for the National Highway System. Accordingly, the asset management plan developed pursuant to 23 U.S.C. 119(e) will serve as both a resource and a road map for the State s efforts to achieve and sustain a state of good repair over the life cycle of the assets, and to make progress toward those national goals and the State s targets for pavement and bridge condition established pursuant to 23 U.S.C In addition to these national measures for pavement and bridge conditions under section 150(c)(3)(ii)(I)- 25

26 The FHWA recognizes that many State DOTs already use management systems as a critical element in their investment decisionmaking process. Those systems have been developed and refined, in many cases over a long period of time, through the State DOT s continuing evaluation of the effectiveness of investment strategies in improving infrastructure conditions. The FHWA also recognizes that the measures used in these legacy systems for pavement and bridge conditions may not be identical to the national measures FHWA establishes under 23 U.S.C. 150(c). Considering this possibility, FHWA expects State DOTs will choose, and in some cases may be required by State law, to continue to use their legacy systems to assess infrastructure conditions and to develop strategies that will drive their investment decisionmaking. Accordingly, FHWA is proposing to permit State DOTs to include their pre-existing measures and targets for NHS pavement and bridge condition and performance in their plans even after the section 150 measures and targets are established, so long as those non-section 150 measures and targets are treated as supplemental to the section 150 measures and targets. Non-section 150 measures and targets cannot substitute for section 150 national measures and associated State DOT targets under 23 U.S.C. 150(d). The State DOTs will be held accountable for including section 150 measures and targets in their plans and meeting title 23 requirements relating to those section 150 measures and targets. However, a State DOT asset management plan s investment strategies may be influenced by both the section 150 measures and targets and any other measures and targets the State DOT (III), FHWA will establish performance measures for the performance of the Interstate System and the performance of the NHS (excluding the Interstate System) as required by 23 U.S.C. 150(c)(3)(ii)(IV) - (V). The FHWA will propose the national measures as part of separate rulemakings pursuant to section 150 (RIN 2125-AF54 and RIN 2125-AF53). 26

27 includes in its asset management plan. The FHWA expects State DOTs with legacy systems will make the changes needed to fully use and support the new national measures and targets once established pursuant to 23 U.S.C The FHWA understands and appreciates the amount of work required to make these changes. The FHWA is committed to providing technical assistance to State DOTs as they work to improve their ability to reliably predict how their investments can lead to pavement and bridge condition improvements as defined using the new national measures. Implementation The FHWA is proposing special phase-in provisions as a part of this rulemaking. The proposed rule would provide a phase-in for both the asset management plans and the MAP-21 section 1315(b) evaluations of roads, highways, and bridges that repeatedly required repair and reconstruction activities. As the expected timelines for completing this rulemaking and the 23 U.S.C. 150 rulemaking become more certain, FHWA will be able to better predict how the timing of each rulemaking affects the other. The FHWA may revise the proposed phase-in approaches to address any timing or other issues resulting from the ultimate timelines and requirements in final rules implementing sections 119 and 150. The proposed phase-in for section 119 asset management plans would permit a State DOT to submit its initial asset management plan using best available information for each required plan element, and to omit certain analyses. In addition, the State DOT would be permitted to submit its initial plan without the 23 U.S.C. 150 measures and targets unless the State DOT had established its section 150(d) targets for pavement and 27

28 bridge conditions at least 6 months before the section (a) deadline in this proposed rule for submitting the initial asset management plan. The State DOT s initial asset management plan would have to include its proposed processes for each required area of analysis in proposed section , and otherwise meet the requirements in proposed section , including the identification of investment strategies that support progress toward the national goals in 23 U.S.C. 150(b). Not later than 18 months after the effective date of the final rulemaking for pavement and bridge condition measures pursuant to 23 U.S.C. 150, a State DOT that used the phase-in option for its initial plan submission would be required to submit an amended plan that includes all section analyses performed using FHWAcertified processes. That amended plan also would have to include the State DOT s section 150 measures and targets for NHS pavements and bridges. Under the proposed rule, FHWA could extend the 18-month time period as needed to provide 12 months between the time FHWA certifies the State DOT s processes under 23 U.S.C. 119(e)(6)(A) and the date the amended plan is due. The FHWA could grant the extension only if it determines the State DOT s initial plan meets the requirements of section of this proposed rule. The FHWA considered a number of factors in developing the phase-in proposal for asset management plans. First, the proposal responds to the challenges some State DOTs will face in developing and applying the processes described in proposed section Both State DOTs with legacy asset management planning systems and State DOTs new to asset management may face time and resource challenges due to the need to develop and apply new or modified processes. 28

29 Second, the phase-in approach is needed to address timing and coordination issues inherent in the process certification and consistency determination provisions of 23 U.S.C With respect to process certification, FHWA proposes to use the State DOT s initial asset management plan as the basis for the certification of the State DOT s asset management plan development processes under section 119(e)(6)(A). Permitting State DOTs to submit their initial asset management plans using best available information for each required plan element would allow State DOTs to obtain FHWAcertification of their plan development processes before they undertake analyses using the processes. There also is a potential implementation issue with regard to FHWA consistency determinations under 23 U.S.C. 119(e)(5). The issue relates to the availability of the 23 U.S.C. 150 national performance measures and the related targets that State DOTs must include in their asset management plans. Investment strategies in an asset management plan, and the underlying analytical work such as performance gap analysis, are highly affected by the selected performance targets. There is a substantial probability that the FHWA performance management rulemaking under 23 U.S.C. 150, and the subsequent State DOT target-setting under section 150(d)(1), will not be completed in time for the State DOTs to include their section 150(d) targets in a fully developed asset management plan prior to the first required FHWA consistency determination. The first determination is required for the second fiscal year after this rule is final. Absent this consistency determination, the Federal share on the State DOT s NHPP projects would be reduced to 65 percent. The consistency determination also demonstrates the State DOT has an approved plan under the NHPP obligation transition provision in MAP-21 section 29